Interest rate rises likely in coming months, Bank of England economist says
Summary
Bank of England chief economist Huw Pill said interest rates may need to rise again next month and in early 2027 to bring inflation back to the bank’s 2% target. He warned that higher energy prices and wage demands could keep inflation elevated, while further borrowing-cost increases could weigh on some industries and household spending.Key Facts
- The Bank of England recently raised its key interest rate from 3.75% to 4%.
- Pill said he expects evidence to support further interest rate increases.
- Inflation is expected to reach 5% in spring 2027, driven in part by high oil and gas prices linked to the Iran war.
- Pill said he was concerned that higher costs could lead to wage increases and further price rises.
- Financial markets expect UK interest rates to rise to nearly 5% in 2027.
- An estimated 2.3 million homeowners are expected to refinance their loans next year.
- The UK economy grew by 0.7% in the third quarter.
- The energy price cap for a typical UK household is expected to approach £2,000, while council tax bills are expected to rise by an average of nearly 5%.
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